Thursday, July 27, 2006

Make sure to check out last weekend’s story in the New York Times Magazine on the Chicago Climate Exchange (CCX) and carbon trading.It talks about the history of the exchange and its chairman and CEO Richard Sandor.Don’t forget, this is similar to, but separate from the EU Emissions Trading Scheme (ETS) – which has government enforced caps, and is up and running, showing more and more signs of being a ‘real’ market – with ridiculous growth potential.

Here’s a good excerpt cover the basics of a ‘cap-and-trade’ system:

Sandor’s interest was sparked by the Environmental Protection Agency’s 1990 Acid Rain Program, which sought to reduce sulfur dioxide emissions from coal-burning power plants in the United States. The design of the program was ingenious but simple. Instead of trying to regulate sulfur dioxide emissions the usual way, by dictating a certain kind of emissions-control technology on each power plant, the E.P.A. employed what is known as a cap-and-trade program. The agency set an overall limit, or cap, on the amount of emissions permitted from all power plants combined. Then it allotted a certain number of pollution allowances to each emitter and let the operators of individual plants figure out how they wanted to proceed. A company might install scrubbers or switch to lower sulfur coal in order not to exceed its quota, but if the company determined that polluting beyond its quota was necessary, it could buy additional allowances from companies that had not used up their allotments. Companies that reduced their emissions could bank their credits for later use or sell them for a profit.

And here’s a taste of the upside potential in the carbon markets:

But of course, green is also the color of money. And Sandor, who has been called ³the father of financial futures² for his role in creating interest-rate futures in the 1970¹s and who made a fortune during the boom years of the 80¹s at Drexel Burnham Lambert, the firm of the junk-bond king Michael Milken, is also familiar with that particular shade. However high-minded in principle, the Chicago Climate Exchange is also about making a buck off the planet¹s looming climate catastrophe.

Not that there¹s anything wrong with that. In fact, the trading of greenhouse gas allowances, also known as carbon trading, may be capitalism¹s best answer to the problem of global warming. To avoid a dangerous degree of climate change, many scientists say, greenhouse gas emissions worldwide will have to be cut by 50 to 70 percent over the next 50 years. The only hope of achieving that, short of an unforeseen technological breakthrough or the passage of draconian environmental laws, is to inspire radical change in the economic system. In a carbon-trading scheme, you must pay to pollute: price tags are placed on greenhouse gas emissions and then the market (not the government) essentially figures out the cheapest, most efficient way to reduce them. ³The beauty of carbon trading,² Dan Dudek, chief economist at Environmental Defense, a nonprofit advocacy group, explained to me, ³is that it takes a primal human impulse <>

Leveraging the power of greed is an interesting one, and reminds me of one of my favorite books, Atlas Shrugged by Ayn Rand – it speaks to the power of free markets, as well as how misunderstood and misused the concept of free markets can be – responsibility must be at the heart of such a system, it is the productive element of society holding the atlas on our shoulders, and it does no good if we do that in a way that destroys the atlas itself.As we reach the bio-physical limits of our planet, it is not as clear what indirect or time-delayed impacts our actions will have on others and the biosphere as it was in Rand’s time – I think were she writing today it would be about the adjustments that need to be made to our current system to get back to the heart of free market capitalism, and what fundamental adjustments need to be made to deal with our new-in-the-history-of-humanity reality of a globalized world.(On that note, I just stumbled across and interesting movie on the subject – Fixing Capitalism– check it out).And I think she’d definitely be in support of a strong, enforced international cap-and-trade system for greenhouse gases.So, make sure your congressmen support these initiatives (RGGI, Climate Action Registry, etc) and urge the companies you’re involved with to engage.Stay going.

Wednesday, July 26, 2006

Many thanks to my buddy Sam, who passed on the article below, which his buddy Carl Bialik wrote for the Wall Street Journal.I’m posting it here, as it clarifies some of the methodology used to determine the scores in the “Happiness Index” (subject of my previous post).I’m throwing it on here for two main reasons:

1)It is always good to be transparent and thorough.When I posted the previous piece, I knew that the creators of this index must have made some heavy assumptions, and this article outlines them.

2)It made me realize I wasn’t really explicit enough on my last post about why this index is interesting enough to highlight – it’s not because I think we’d be happier if our economy “small scale agriculture and tourism.”The main point is only that it highlights the fact that we currently measure success in the most absurd way – GDP growth.I think the objective of this index was not to find out who are the happiest people on earth, but to demonstrate that the formula for determining GDP/GNP is grossly simplistic and pursuing its growth results in perverse and dangerous side-effects.I also don’t think this index is the answer (neither is the GPI or the ISEW), but they are all important strategic step in starting to re-conceptualize our measures of success – to suspend our beliefs about our current model and honestly evaluate it.

Another important point that the piece below touches on, is that it is exceedingly difficult, if not impossible to know how “happy” people are (we’re not talking about moods here, but the Aristotelian concept of living well).Again, I think we’re in need of an important re-conceptualization, and it’s helpful to look at this through the lens of Max-Neef’s basic human needs, and differentiating between needs and satisfiers of those needs.Still, to what extent ones needs are met is an inherently subjective question, and measuring one’s ability to meet ones needs is also very tricky.This is, in part, why it is often difficult to identify and eliminate violations of the 4th sustainability principle (including things like paying developing country laborers low wages, instead of no wages) – but at least it gives us a place to start evaluating these questions in reality and not following theoretical models to our own demise.Difficulty is no excuse not to try.Stay going…

Putting a Number on HappinessJuly 20, 2006

The 200,000 people of Vanuatu -- a South Pacific nation composed of 83 islands, with an agricultural economy and corporate headquarters of file-sharing service Kazaa -- are the happiest on earth, according to a wave of recent articles.

"For the sake of Gross Global Happiness, I have resigned," Stuart Jeffries wrote1 in the Guardian, noting that his home in the United Kingdom ranked 108th in world happiness. "I am going to the South Pacific island of Vanuatu, which is the happiest country in the world according to a new survey." The Pittsburgh Post-Gazette picked up2 on the Guardian report, adding that the U.S. ranked 150th of 178 nations. The BBC attributed3 the islands' happiness to good weather, beautiful coastlines and a lack of income tax. In Scotland's Sunday Herald, Tom Shields added4, "Their culture is based on centuries of polygamy, dancing and drinking kava." A national news site, Vanuatu Online, quickly incorporated the illustrious title into its home page5, welcoming visitors to "the world's happiest place!"

The problem is, no one has asked Vanuatuans how happy they are. The ranking was based on extrapolating happiness levels from other countries.

Vanuatu received its designation last week from the New Economics Foundation, a U.K. think tank, in a report6 laying out its numerical "Happy Planet Index." The index used a formula to quantify the happiness of citizens, using the assumption that a "happy" person is someone who lives a long time, identifies themselves as generally satisfied, and uses an appropriate amount of natural resources. That last bit was included because the think tank was trying to measure the countries that best balanced their citizens' happiness and ecological concerns -- a subtlety lost in some of the press coverage.

The group relied on outside sources for the individual statistics, before applying its own calculations. For instance, the satisfaction scores came from a range of surveys conducted around the globe, most notably the World Values Survey7, an international research network which has surveyed people in over 80 countries. The environmental impact numbers originate primarily with an Oakland, Calif., non-profit organization called Global Footprint Network8.

In the case of the World Values Survey, there were no data available for Vanuatu. That survey reached fewer than half of all nations, and Vanuatu wasn't among them. Even if the archipelago had been included, it would have been tough to get a representative sample: There is fewer than one phone line for every 10 people, according to the CIA World Factbook9.

To fill in that gap, New Economics extrapolated Vanuatu's happiness score from happiness surveys in Africa and Asia, and made some adjustments based on the unique demographics of Vanuatuans.

So following that questionable adjustment, New Economics arrived at this winning formula for Vanuatu: Its people live an average of 68.6 years, are satisfied at a level of 7.4 -- on a scale of 1 to 10 -- and have an environmental footprint of just 1.1. By contrast, the numbers for the sad, natural-resource-hogging U.S. are 77.4, 7.4 and 9.5.

The rankings would have differed greatly had the group sought merely to determine which nations are happiest, rather than coming up with a happiness "efficiency" score that took into account resource consumption. Nic Marks, who devised the report for New Economics, emailed me a spreadsheet that left the resource factor out, and looked only at life expectancy and satisfaction. Suddenly, life looked a lot better in the U.S.: Americans ranked 19th in those terms, two spots ahead of the U.K. and 30 spots ahead of Vanuatu. Switzerland was first, with Denmark second.

We will soon know much more about world happiness: "The best survey is yet to come," said Ed Diener, professor of psychology at the University of Illinois, referring to an ambitious effort by the Gallup Organization to conduct surveys this year in as many as 140 countries, with nationwide, random samples and consistent methodology. Gale Muller, who heads research for the poll, told me 95% to 97% of the globe's population will be represented, and that numbers should be available by year's end. Gallup will be asking respondents about their feelings about the future, about their satisfaction with the basics of life such as food and education, and about their confidence in national institutions such as the government and the media.

Among the smaller spots Gallup has included or plans to include: Balkan nations such as Montenegro, and the Palestinian territories. However, Gallup isn't planning to survey Vanuatu, because of expense. (Dr. Muller hadn't heard of the nation's distinctiveness in the field of happiness before I mentioned it.)

"To try to say, who are the happiest people on the planet, boy, you have to be careful -- under what circumstances, what does happiness mean, and all of those things," Dr. Muller said. "But what you can do is say, how does self-reported happiness change over time?"

Tuesday, July 18, 2006

Life, Liberty, and the Pursuit of Happiness -- Well, One Out of Three Ain't BadThe happiest nations are not the high-consuming ones, survey says

A new Happy Planet Index supports the cliché that money can't buy happiness. The New Economics Foundation, a British think tank, looked at 178 countries' consumption levels, life expectancy, and happiness, and concluded that people can live long, happy lives without sucking up large quantities of the planet's resources. In its ranking of happiest nations, the South Pacific island of Vanuatu earned the top slot. Vanuatu, population 209,000, runs its economy mainly on small-scale agriculture and tourism; its GDP has been ranked 207th out of 233. Latin American countries dominate the top 10 happiest nations, with Colombia in second place. Many African and Eastern European nations are near the bottom, with Zimbabwe the official unhappiest nation. The U.S., with the world's second-largest ecological footprint (after oil-rich United Arab Emirates), ranked an unhappy 150th. Report co-author Nic Marks says the report reveals "patterns that show how we might better achieve long and happy lives for all while living within our environmental means."

For a more in-depth, and far more boring look at the divergent correlation between GDP growth and well being check out this earlier post on the Threshold Hypothesis... Also, my love and thoughts going out to Zimbabwe and all my friends & 'family' living there... an unfortunate mess. Stay going.

Highly recommended for my econ / wall st. buddies, I'm always interested as to when the street and analysts are really going to start picking up on this stuff. It's happening more and more, evidenced by companies like Innovest and Trucost Plc and initiatives like the Carbon Disclousure Project. As for the true cost article, it's good to see continued efforts to internalize harmful externalities like emissions pollution, but I remain a bit wary as it perpetuates the attitude that "what's measured matters" ... whereas I believe that "not everything that counts can be counted." Stay going.

Sunday, July 16, 2006

Sports fans, sports haters, Chomsky fans, Chomsky haters... anyone who likes big words, check out a great - funny and thought-provoking - piece written recently by Isaac Souweine, a good buddy of mine from The Mountain School:

There has been an idea floating around in my head for a while that I haven’t been quite able to articulate, but I’m going to try.It has to do with the power of sustainable development to spark innovation.Strategic sustainable development has a major focus on the idea of “free creativity within basic constraints.”That is, with the shared-mental model of what constitutes success – i.e. sustainability (a society in which the 4 sustainability principles are not violated) – people are free and encouraged to be creative and innovative about how to achieve that success.How to discover new and better ways for us to go about meeting our needs and living fulfilling, abundant lives without violating those four basic principles.

When this clicks, it’s very powerful.It makes you want to run out and become a product designer, an economist, a farmer, an electrical engineer, a school teacher and a politician all at once.But it can also be very overwhelming.You quickly realize you can’t do it all on your own.You study the power of networks, cooperation, chaordic organization, and you look to engage others.

I got thinking about all of this again yesterday when I watched Majora Carter’s presentation from TED.(Check it out, less than 20 minutes).One of the concepts she mentioned was urban revitalization and employment through “Green Collar Jobs” – I thought this was a great name for at least part of this concept I’m getting at.

Nietzsche said: “He who has a why to live for can bear almost any how.”In the movie Cocktail Tom Cruise points out that whoever invented the paper cocktail umbrella is a millionaire, and it’s a desire I’ve often heard expressed – to invent some cheap little piece of crap that billions of people will buy, enabling early retirement.At its core, that concept represents fruitless endeavors, at best you end up rich and empty, trying to convince yourself that the cocktail umbrella makes the world a better place.But if there’s a great “WHY” attached to such an idea, it can become powerful and meaningful, and be an exciting driver of innovation, industry, and development (i.e. the growth of value, as opposed to just the growth of physical stuff for its own sake).

Now apply that to a city, and imagine the great “why” is to become a fully sustainable city – to create ways to go our business in ways that don’t violate the 4 sustainability principles.This “why” is inherently compelling, for (at least) two major reasons.First, unsustainable activities are creating compelling motivations to change already – mass extinctions, climate change, all sorts of human illnesses (cancer, depression, asthma, heart disease) and catastrophes (starvation, flooding, terrorism) etc.Second, we all seem to have an innate desire to at least give our children and future generations a chance at survival.The implications of the funnel make it clear why we must change.

The phenomenal and exciting thing is that in pursuing this great why, this meaningful purpose of creating a sustainable city, there is immediately huge opportunity.Now this is more than, say, trying to spark an ailing municipal economy by creating incentives for a recycling plant to setup shop.That is simply addressing one issue in an isolated sort of way.What’s compelling is addressing the whole system, the flows of materials and energy, and creating supportive, inter-related sustainable systems.All of the sudden there is a need for those product designers, economists, farmers, electrical engineers, school teachers and politicians to create a common understanding of what the end goal is (sustainability), and to then get busy getting there.

The demand for green collar jobs is huge, and synergies between businesses, industries and other activities accelerate this positive development. Waste management becomes the source of raw materials for new production as well as the source of nutrients and fertilizers for farmers and foresters.An upstream, preventative mentality gets children and elders involved in positive ways, keeping them healthy and fit, freeing up health care dollars and drug R&D expertise to focus on things we want, things that make our lives better.The scenarios go on and on – and thankfully, so I don’t have to sound like I have my head in the clouds, there are more and more examples all the time of these sorts of things actually happening – Majora Carter’s South Bronx projects being one example.

Apologies for a bit of a ramble, but hopefully some interesting things to chew on.Stay going.

Thursday, July 13, 2006

Check out this 2005 article from Environment for a thorough, but manageable read on the sustainability and sustainable development picture.It covers so much in relatively (sort of, maybe not really) simple language – the science, the problem, whole-system thinking, the need for transdiciplinary education & policy making, participatory decision-making, the issues global inequities bring on, the evolution of the nation-state through globalization, the governing of the global commons, shortcomings of the UN, the downfall of the neo-classic trade-off mentality, where the CDM fits in, the optimum scale for governance and economy (cities?... the list goes on.It has a great recap of the huge benefits and advancements of the last 100 years and lays out the big issues we all need to be focusing on for the next 100 years.It touches on much of what we covered this year, and comes to very similar conclusions.I am confused by the last paragraph calling for principles around which we can get consensus and get down to the business of sustainable development – it makes me wonder if they don’t find the 4 principles sufficient, or are simply not familiar with them… we’ll see.

Wednesday, July 12, 2006

I’m going to make the under-precedented move of recommending a book I haven’t even read yet:Perverse Subsidies. While it might not seem like the biggest page-turner, it’s high on my list, and I’m hoping it will clarify the rather complicated, yet terribly important world of government intervention in the global economy – where it’s good for us and where it’s bad for us.Given that content is in some ways inherently dry, I’m not expecting you all to run out and buy it, but I would highly recommend checking out this Amazon review by Robert Costanza(a stud Ecological Economist – scroll down to the 3rd review).

This little blurb from PointCarbon is what got me thinking about this issue again this morning:

11.07.06WWF calls for Marshall Plan for climate change(subscription required)The Group of Eight (G8) nations need to switch conventional fuel subsidies amounting to $250 billion per year to fund ambitious energy efficiency and renewables targets, according to a study released today by Environmental group WWF.

Unfortunately, I also read that Bush is working on pushing a pro-nuclear platform at the G8, and promising Russia billions to take the waste, here’s the scoop from Grist (they're wicked funny):

One Minute to MidnightBush plans nuke deal with Russia; G8 to spread nuclear power worldwide

On the eve of next weekend's meeting of the G8 -- where developed nations will unveil an ironically named "global energy security" plan that would expand nuclear-power technology across the globe -- the U.S. will announce a deal with Russia that would allow broad cooperation between the two countries' civilian nuclear industries. Russian President Vladimir Putin has been pushing hard for nuclear power: Under the G8 plan, he hopes to use his country's nuclear expertise to mass-produce floating nuclear power plants on barges. Seriously. And under the deal with the U.S., Russia would be paid billions to store much of the world's nuclear waste -- especially comforting given the country's solid nuclear security record. The G8 plan would resurrect fast breeder reactors, which don't require as much uranium but produce highly fissile waste; thankfully, developing nations that receive the technology would have to promise not to use it for weaponry. Possibly even pinkie swear. We sure hope Iran and North Korea aren't reading the newspapers.

So, while the global economic / energy / security picture may still seem overwhelming and confusing, here’s a little thing you can do right now to exercise your democratic muscle and get us on the right track – this is what seems like a pretty well-organized site aimed at sparking some political will:http://www.priceofoil.org/addicted/

I highly recommend taking a few seconds to go through the motions.By separating oil from state, we have a better chance at eliminating the perverse subsidies that help keep fossil fuels artificially cheap. Those billions can then be put towards holistic strategies that radically reduce energy and fuel demand, while at the same time foster smart growth, and clean, renewable energy sources – remember we’ve got a virtually unlimited amount pouring down on us everyday that can be converted and used in many ways (solar, wind, biomass, hydro, etc). That way we can avoid the horrors (ecological, social and economic) of nuclear. Every voice counts.Stay going.